For the first quarter ending June 30, the world’s largest mobile operator added 4.5 million new customers (net), compared to expectations of 4.4 million. However, when the figures include acquisitions, namely the $4.55bn acquisition of Telsim Mobil Telekomunikasyon AS back in December, Vodafone actually added 11.7 million new customers, taking its total quarterly additions to 16.2 million customers. This has helped push the total worldwide client base of the Newbury, UK-based mobile operator to a healthy 186.8 million.
This is a robust operating performance in testing markets with revenue for the quarter in line with expectations, said Sarin in a statement.
Shares in the operator rose 2.47% on the London Stock Exchange to 114 pence ($2.11) following the news.
Vodafone has been dogged by months of bad news so far this year, with reports earlier in the year of a boardroom power struggle, and the sale of its struggling Japanese unit (Vodafone KK). In May, it posted the largest ever loss in UK corporate history when it revealed a year-end net loss of 21.82bn pounds ($41.1bn), compared to a net profit of 6.51bn pounds ($12.28bn) the previous year. This loss was the result of a one-time charge of 23.5bn pounds ($44.31bn) after it wrote down assets in Germany as well as Italy and Sweden.
Vodafone is relying on its emerging markets, notably in this quarter from Romania, Egypt, and Australia, to supply the bulk of any growth, as its main western European markets are heavily saturated, and intense competition in these markets has meant that Vodafone has actually lost market share.
In Germany, it added 253,000 new customers in the quarter, taking its total client base there to 29.4 million. In Italy it registered 69,000 new customer additions in the quarter, taking the customer base to 18.6 million. Spain was one its strongest performing European operations, and it added a further 428,000 customers in the current quarter to increase its customer base to 13.9 million. However, the news was not so good in the ultra-competitive UK market, where Vodafone lost 119,000 customers in the current quarter. This comprised 29,000 net additions for contract customers and a decline in prepaid customers of 148,000.
In the US, Verizon Wireless continued to perform well, adding 1.8 million new customers during the quarter.
This mixed bag of results meant that Vodafone said first-quarter revenue growth in the saturated European market was at just 1.3%, compared to 13.9% for the rest of the world. For the entire worldwide operation, Vodafone recorded revenue growth of 6.4% for the quarter.
The operator said that growth in the 3G area continued in line with expectations, with an additional 1.3 million 3G handsets added during the quarter, taking its total 3G device base to 9.1 million in its subsidiaries and joint ventures, and a further 2.0 million in its associates.
Sarin said that 3G broadband via HSDPA is now available in eight of its major markets, and over 7 million customers have now registered for the Vodafone Passport scheme, which allows for cheaper roaming costs.
However, the recent proposals by Viviane Reding, the EU Commissioner for Information Society and Media, to cap mobile roaming charge, is a worrying development for European mobile operators.
We do not expect any clarity on mobile roaming regulations until the year-end, said Sarin during an early morning conference call with the press, and therefore we do not expect any impact on our guidance. Sarin also announced that Vodafone had completed 500 job cuts at the its Newbury headquarters, which equates to approximately 19% of staff in this area.
Sarin would not be drawn on the possibility of Vodafone acquiring a company so that it can offer customers a fixed-line broadband offering such as Orange SA, where customers spending over 30 pounds ($55) per month receives a free broadband connection, via France Telecom’s internet arm. Vodafone already offers a similar service in Germany thanks to a subsidiary there, but is hopelessly exposed in the UK market where it has nothing to offer other than a HSPDA 3G connection. Sarin said that when Vodafone finds the right vehicle to deliver this we will let people know.
Our preference is asset light, but we have to decide how light is light, said Sarin, seeming to indicate that Vodafone would be prepared to acquire a fixed-line operation if there was no other credible alternative.
Sarin denied that Vodafone was being left behind the triple-play market. Vodafone is more interested in FMC and our HSPDA 3G network, he said.
He said there was no new news about Vodafone’s 40% stake in Verizon Wireless, which some have speculated that Vodafone would sell for as much as $65bn. Sarin also denied that Vodafone would compete separately in the forthcoming spectrum license sales in the US, insisting instead that Verizon Wireless is Vodafone’s core platform in the US market and would compete as such.
Looking forward, Vodafone also pleased the markets by reiterating its current year guidance. It said it expects organic growth for this financial year in proportionate mobile revenue in the 5% to 6.5% range.
Overall, the markets were pleased with the figures, but Sarin is facing some immediate challenges, especially now that one his key lieutenants, Bill Morrow, has decided to leave the operator at the end of the July.
